FINANCIAL services firms are back in the bullpen and jockeying for the city ‘s limited availabilities for the first time

since 9/11.

Their appetite for space is coming as law firms continue their unabated growth through mergers and acquisitions.

Rather than adding unused space to the market as they had been,the financial firms are pulling this sublease space off the market while at the same time seeking expansion possibilities.

“New York City has always been driven by the financial markets both in good times or bad depending on whether the banking and brokerage houses are expanding or consolidating,” said Mitchell S.Konsker,executive vice president of Cushman & Wakefield.

“Today they are growing tremendously and there is no indication that it ‘s slowing.This is not being driven by law firms but by the financial firms.The sleeping giant has awakened.”

Konsker noted that any firm commiting to new space is contemplating at least a 10 to 15 percent expansion.

In January,Cushman &Wakefield warned the strong demand for the remaining handful of large blocks of space – over 200,,000 square feet – will soon leave Midtown companies without options.

That scenario has continued throughout the year even as rents kept driving upwards.As of the end of the third quarter the absorption of space in Midtown absorption contributed to a firm- ing up of asking rents to $48.07 a

foot,the highest level in nearly three years.

The Madison and Fifth Ave. asking rents continue as the highest in the city at $71.44 a foot. The financial giants are not only absorbing Class A space. Because new regulations require auditing departments to be in separate buildings from other functions,those departments are sometimes located in top tier Class B buildings.

“We are seeing more and more smaller uses from major institutions,” said Anthony Malkin,,president of Wein &Malkin which operates the W&M and W&H portfolios. And of course,Malkin is among those whose corner retail spots are being gobbled up by banks. There are also a growing number of very wealthy hedge fundias – folks who manage mostly other peoples ‘ money – who are leasing small pockets of very elegant space in the city ‘s top office properties.

“If you are in the hedge fund business you are still drawn to a few select buildings,and there is a collegial benefit to being in them,” said Malkin..

“To a large extent,these guys are limited geographically because they are interested in being close enough to where companies make presentations – places like The Pierre and The Waldorf-Astoria.”

Yet Barry Gosin,Chairman of Newmark &Co.says there are misconceptions about the financial sector.

“Some of the hiring percentages aren ‘t as great as you think,” advised Gosin. “Some are absorbing their own space.”

David Goldstein,executive managing director of Studley,is among those that work with many law firms.

“It ‘s no shock to anyone that law firms are the top consumers of quality office space in Midtown,” Goldstein said..

He said there are a “handful ” of out-of-town law firms that are aggressively growing New York offices by recruiting practice groups and courting other smaller firms as a way to grow revenue, and expects it is a trend that will

continue to help absorption.

“Midtown is on pace to have a pretty good year and has a decent amount of high quality demand that will lead into next year and we expect pretty good absorption numbers in both the first and second quarters of ’06. Indeed,available big blocks of space in Midtown are being absorbed at a steady clip and there is concern that by next year, there will be few options for expanding companies.

“At least four or five blocks have been leased over the last two months so we are seeing the big blocks shrinking even as there is greater demand for those big blocks of space,” said Konsker.Unfortunately,he added,there is

as of yet,no absorption spillover to the Downtown market. Some absorption of big blocks has also occurred as they were cut up into smaller sections – for instance by floor – and then some floors were leased.

“Now the space is not all gone but the block is gone,” explained John Powers,Chairman of the Tri-State Region for CB Richard Ellis.

There are not a lot of big deals being made Downtown,agreed Gosin.

He says there are a few tenants in the 200,000 foot to 300,000 square-foot range,then the size drops to the 30,000 to 50,000 foot range. Gosin noted there are now fewer large corporations doing business in the city.

“Over the long haul it ‘s probably good…as it is becoming a city of smaller businesses which provides a more diversified base,” Gosin added.

Midtown South also had its vacancy rate drop 3.1 percent to 8.1 percent,the lowest since midyear 2001.